Quiz | December 2009

Test Your Investing Instincts

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Think you're a smart investor? How you invest and how you react to market conditions can make a big difference in your success.

Put your instincts to the test with our ten-question quiz:

Quiz

Test Your Investing Instincts

Question 1 of 10

The stock market takes a sudden dive. What should you do?

A. Make sure you're well diversified, then stand pat.
B. Move everything into cash and bonds.

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Quiz

Test Your Investing Instincts

Question 1 of 10

The stock market takes a sudden dive. What should you do?

You're right! A. Make sure you're well diversified, then stand pat. is correct.

Sorry, wrong! is incorrect.

The right answer is A. Make sure you're well diversified, then stand pat..

Now's a good time to reevaluate your holdings. Long-term investors should keep at least 70% of their investments in stocks and stock funds. Spread your stock money over several types of companies -- large and small, U.S. and foreign. Resist the urge to put all of your money into bonds and cash.

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Quiz

Test Your Investing Instincts

Question 2 of 10

The market has been in the dumps for months. What's the smartest move?

A. Pull all your money out -- you don't want to lose any more.
B. Leave your accounts alone and stop making further contributions for now.
C. Buy while stocks are cheap.

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Quiz

Test Your Investing Instincts

Question 2 of 10

The market has been in the dumps for months. What's the smartest move?

You're right! C. Buy while stocks are cheap. is correct.

Sorry, wrong! is incorrect.

The right answer is C. Buy while stocks are cheap..

Remember that old adage, "buy low, sell high?" Well, a market slump is an opportunity to do just that. Prices are down, but they won't stay down forever. Look for solid companies likely to make a comeback when the economy revives.

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Quiz

Test Your Investing Instincts

Question 3 of 10

Which of theses investments offers you the most diversification?

A. Gold
B. A company stock
C. A stock mutual fund

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Quiz

Test Your Investing Instincts

Question 3 of 10

Which of theses investments offers you the most diversification?

You're right! C. A stock mutual fund is correct.

Sorry, wrong! is incorrect.

The right answer is C. A stock mutual fund.

Mutual funds are like a box of chocolates -- they give you variety in one package. Your returns aren't tied up in the fate of one company because each stock fund owns several stocks.

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Quiz

Test Your Investing Instincts

Question 4 of 10

As an employee, your company allows you to buy shares of its stock at a 15% discount. Your employer also kicks in a match on your investment.

A. Sweet deal! Funnel as much money in there as you can.
B. Good deal! But be mindful of how much money you tie up in the company.
C. Bad deal! Steer clear of the offer altogether.

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Quiz

Test Your Investing Instincts

Question 4 of 10

As an employee, your company allows you to buy shares of its stock at a 15% discount. Your employer also kicks in a match on your investment.

You're right! B. Good deal! But be mindful of how much money you tie up in the company. is correct.

Sorry, wrong! is incorrect.

The right answer is B. Good deal! But be mindful of how much money you tie up in the company..

Don't put all your eggs into one basket. You shouldn't tie up more than 10% to 15% of your savings in one company, especially when that company is also your employer. If things turn south for the business, you could lose your nest egg and your job (remember Enron?). Contribute up to that limit, then diversify your money elsewhere for safety.

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Quiz

Test Your Investing Instincts

Question 5 of 10

So-called "dollar-cost averaging" -- investing a fixed amount at set intervals of time -- is for...

A. Suckers.
B. Smarties.

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Quiz

Test Your Investing Instincts

Question 5 of 10

So-called "dollar-cost averaging" -- investing a fixed amount at set intervals of time -- is for...

You're right! B. Smarties. is correct.

Sorry, wrong! is incorrect.

The right answer is B. Smarties..

This is a smart investment strategy. It won't boost your returns -- for the best returns you need to buy low and sell high. But because it's nearly impossible to time the market, dollar-cost averaging is the next-best thing. It takes the emotion and guesswork out of investing, smoothing out the market's ups and downs.

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Quiz

Test Your Investing Instincts

Question 6 of 10

You've invested in a particular fund for years, and it has done fairly well. You receive notice that the fund manager is leaving, and the new manager will change the way the fund invests. You...

A. Stick with it. After all, you have a history together.
B. Consider cutting it loose.

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Quiz

Test Your Investing Instincts

Question 6 of 10

You've invested in a particular fund for years, and it has done fairly well. You receive notice that the fund manager is leaving, and the new manager will change the way the fund invests. You...

You're right! B. Consider cutting it loose. is correct.

Sorry, wrong! is incorrect.

The right answer is B. Consider cutting it loose..

Those are two key signs you should reevaluate your investment. Research the new manager's record. And ask yourself if the new style of investing fits with your overall portfolio's plan. If either doesn't match your needs, cut the fund loose. Loyalty means nothing.

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Quiz

Test Your Investing Instincts

Question 7 of 10

Tech stocks are hot. You change your allocation from 10% to 80% of your portfolio.

A. Smart move.
B. What was I thinking?

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Quiz

Test Your Investing Instincts

Question 7 of 10

Tech stocks are hot. You change your allocation from 10% to 80% of your portfolio.

You're right! B. What was I thinking? is correct.

Sorry, wrong! is incorrect.

The right answer is B. What was I thinking?.

Chasing big returns is often a losing game because the good times don't last forever. You'd have to know the right time to sell -- but no one knows for certain when a sector's had its run. The best investing strategy is a well-diversified one.

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Quiz

Test Your Investing Instincts

Question 8 of 10

You're looking for a super-safe place to stash your emergency savings. You turn to a...

A. Diversified stock mutual fund
B. Bank CD
C. High-yield online savings account

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Quiz

Test Your Investing Instincts

Question 8 of 10

You're looking for a super-safe place to stash your emergency savings. You turn to a...

You're right! C. High-yield online savings account is correct.

Sorry, wrong! is incorrect.

The right answer is C. High-yield online savings account.

Your best option here is the high-yield savings account because it's protected by FDIC insurance, and your money is accessible. Bank CDs are safe, but your money is locked up for a fixed period of time. Stock mutual funds are accessible but can lose a lot of money in fairly short order. And those losses are not insured.

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Quiz

Test Your Investing Instincts

Question 9 of 10

You've always invested for the long-term, keeping about 90% of your money in stocks. But you plan to retire within the next five years. What should you do with your investments?

A. Leave them alone.
B. Start dialing down your risk.
C. Move completely out of stocks.

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Quiz

Test Your Investing Instincts

Question 9 of 10

You've always invested for the long-term, keeping about 90% of your money in stocks. But you plan to retire within the next five years. What should you do with your investments?

You're right! B. Start dialing down your risk. is correct.

Sorry, wrong! is incorrect.

The right answer is B. Start dialing down your risk..

Now's the time to shift some of your money to more conservative investments -- but not all of it. With a short time frame, you'll want to keep about 60% of your money in stocks, and move about 40% of it to more conservative investments, such as bonds. The idea is to start preserving some of your money while maintaining the potential for growth.

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Quiz

Test Your Investing Instincts

Question 10 of 10

You own 20 mutual funds, so you figure you're well-diversified.

A. Absolutely.
B. Not so fast...

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Quiz

Test Your Investing Instincts

Question 10 of 10

You own 20 mutual funds, so you figure you're well-diversified.

You're right! B. Not so fast... is correct.

Sorry, wrong! is incorrect.

The right answer is B. Not so fast....

Just because you own a lot of funds doesn't mean you're well-diversified. Check your funds for overlapping investments. Oftentimes, funds that invest in the same type of securities, such as big-company growth stocks, own many of the same names.

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Test Your Investing Instincts

Results: 0 out of 10 Right

Quiz | December 2009

Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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Test Your Investing Instincts

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